Surprising Decision Reversing an Order Imposing Maximum Penalty for Delay in Payment of Settlement Proceeds

Weber Gallagher Simpson Stapleton Fires & Newby LLP

In Louis Ripp v. County of Hudson, No. A-2972-20 (App. Div. June 3, 2022), the appellate court recently addressed the issue of late payment of awards and penalties and decided same on June 3, 2022. It is a rare decision and the court’s view of deadlines for payments and the basis for the imposition of penalties was surprising.  Petitioner Louis Ripp worked for the County of Hudson (the County) as an assistant chief engineer/boiler operator and injured his back in a workplace accident on February 11, 2013. Petitioner received temporary disability benefits and medical benefits before both his medical expert and the County's medical expert declared petitioner permanently disabled in 2016. On January 26, 2021, the judge entered an Order for Total Disability approving a settlement in the amount of $365,100. It was undisputed that the County was to pay petitioner $173,480 within sixty days of the entry of the Order. The amount is not specifically contained within the Order, but the parties do not dispute the County was obligated to pay that amount, as this amount represented the payments accrued pursuant to the Order.

Petitioner filed a motion to enforce the Order because the County had not made the payments on a timely basis. He also sought simple interest on the settlement amount pursuant to N.J.S.A. 34:15-28, and enforcement of the order for unreasonable payment delay pursuant to N.J.S.A. 34:15-28.2(a). Petitioner also moved for additional penalties for payment delay to be paid into the Second Injury Fund. The County did not file a formal answer to the motion.

Petitioner received full payment of the amount due him on April 12, 2021, sixteen days after the due date, although the County did not issue reimbursement of other expenses at that time.

The judge found that the County’s explanation for the delay in reimbursable expenses to petitioner was reasonable and excluded those amounts from penalty she imposed. The judge's order required the County to pay petitioner an additional $43,370 within sixty days pursuant to N.J.A.C. 12:235-3.16. N.J.A.C. 12:235-3.16(h)(1)(i) allows a judge to "impose an additional assessment not to exceed 25 percent on any monies due if the judge finds the payment delay to be unreasonable.”

In her reasoning, the judge reiterated that the County agreed in early 2016 that petitioner was totally disabled. However, the judge also noted petitioner was receiving Social Security Disability benefits which delayed information to the County regarding petitioner’s earnings. The judge also made note of such factors as the County being a governmental entity, the involvement of an excess carrier, and the COVID-19 pandemic, but still found that the County’s delay was unreasonable and imposed the maximum additional 25% to enforce the Order.

The County appealed and argued that the judge erred in the application of the statute and that there was an abuse of discretion with the imposition of excessive fees.

The Court first noted that the Workers Compensation Act does not require that payment of settlement benefits to petitioners must be made within a specific period of time. In her written supplement to her decision, the judge said under the statute the County had up to 60 days to make a payment. However, the appellate court noted that the statute provides that when lawful compensation is withheld from an injured employee for 60 or more days following the entry of an order, simple interest on each weekly payment may, at the discretion of the Division, be added to the amount due at settlement. They did not interpret this timeline to be the equivalent of a deadline as those practicing in the Division always has.

The Division adopted N.J.A.C. 12:235-3.16(h)(1)(i), which allows a judge to "impose an additional assessment not to exceed 25 percent on any monies due if the judge finds the payment delay to be unreasonable." Unlike N.J.S.A. 34:15-28.1, which deals with delays in paying temporary disability benefits and defines a thirty-day delay as presumptively unreasonable, the legislature did not specify what is a presumptively unreasonable delay in payment of settlement proceeds.

The court noted that this is more than simply calculating the time beyond the due date anticipated by the judge’s order, because a delay of a certain number of days does not per se make a delay unreasonable. Each instance is fact specific as to whether the delay was reasonable.

The court in this instance indicated it was legal error for the judge to consider, among other things, the length of time it took to settle the claim after the parties agreed that petitioner was totally disabled and further that no payments were due until the Order was entered.

In deciding whether the delay is unreasonable, a judge can consider the length of the delay, the size of the late payment, and the effect the delay would have upon a petitioner. However, here the judge relied on delays in the litigation that predated the settlement order. The judge also awarded the maximum penalty under the statute, even though the payment was only sixteen days delayed with extenuating circumstances noted on behalf of the County. Also, the judge did not find any bad faith on the part of the County.

The court vacated the order and remanded the matter to the Division for reconsideration of an appropriate assessment for the minimal payment delay in this case.

Comment:

We would not interpret this decision to abrogate the long-standing practice of assuming payments must be made within 60 days of the date of Court Order following the resolution/settlement of a claim, but this case may help in arguing against the imposition of a penalty and/or limiting the amount in the event the payments are made beyond 60 days.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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